All posts tagged EFSF

On Tuesday night, when Greek officials began briefing that they would seek an extension to the country’s rescue deal from the rest or the eurozone, they insisted journalists understand a clear distinction: “The request is going to ask [for] the extension of the loan agreement and not the bailout,” one of them said.

The difference, the officials explained, was that extending the loan agreement would give Greece access to its last installment from the eurozone’s bailout fund, the European Financial Stability Facility. But it wouldn’t mean, the officials stressed, that the government actually had to accept all the “toxic” austerity measures listed in the Memorandum of Understanding (the legal name of the document that has ruled Greek policymaking for almost five years).

This insistence on making that distinction gave some journalists pause. Was the government of Prime Minister Alexis Tsipras asking for money without any conditions, even though it had been told over and over again that that was a no-go? Or was this yet another euphemism, the proverbial old wine in a new bottle, similar to referring to the “troika” of the European Commission, the European Central Bank and the International Monetary Fund simply as “the institutions”?

At the margins of the World Economic Forum in Davos, Klaus Regling — the head of the transitional euro-zone bailout fund, the European Financial Stability Facility, and the permanent one, the European Stability Mechanism — spoke to WSJ’s Stephen Fidler, Matina Stevis and Matthew Karnitschnig.

Here is a full transcript of the interview, in which the senior official and International Monetary Fund veteran weighs in on the state of Greece, inflation in the euro area and the relationship between the euro zone and the IMF. Read More »

We’re a tad late getting to this, but the International Monetary Fund in its latest report on the Greek bailout took an interesting look at how far euro-zone economic output would fall if Greece ditched the common currency. The fund’s answer: Maybe a lot, maybe not so much – though even the “not so much” scenario looks pretty bad.

The immediate problem for the euro zone is that a resurrection of the drachma would leave many of Greece’s public and private-sector debts to foreign creditors denominated in euros. The drachma would devalue sharply against the euro, helping solve Greece’s competitiveness problems but also making it difficult to repay its foreign debts. Read More »

What one bailed-out country gets, the others should too. At least that was the principle set out by the euro zone. Greece, Ireland and Portugal–despite their many differences—would enjoy the same borrowing terms and conditions. This became the case when the three countries saw the interest rates on their bailouts from the European Financial Stability Facility lowered across the board to Euribor+1.5% last June.

Is this principle of equal treatment now to be abandoned? Let’s rewind to four days ago.

Under a deal struck between euro-zone countries and the International Monetary Fund last Tuesday, Greece is set to get some respite on its bailout terms. It won’t have to start paying interest until 2022 after a 10-year interest payment moratorium expires; it will get until 2042 instead of 2027 to repay its bailout to the euro-zone bailout fund; and the EFSF will charge Greece Euribor+0.5% instead of Euribor+1.5% for its loans. Further, the profits the European Central Bank makes on holdings of Greek-government bonds will be handed in to Greece via national central banks. Not too shabby, one might say, though as we explain here these concessions don’t solve Greece’s more existential problem.

And will the same apply to Greece’s bailout brethren? Based on a briefing by a senior euro-zone official, probably not. Read More »

Disclaimer: this headline is meant to make you click on it but the blog-post may not deliver all it promises. The reason is that, after dozens of hours of tough negotiations by finance ministers that finished early on Tuesday, the hotly-anticipated deal to cut Greece’s debt and give the country the aid it’s been waiting for since June is as clear as mud.

Here we take you through what we do know and highlight what we don’t, especially in view of the latest numbers crunched by debt experts from the troika of the European Commission, the European Central Bank and the International Monetary Fund, that our Gabriele Steinhauser got her hands on later on Tuesday. Read More »

A German-backed proposal to expand the size of the euro-zone bailout funds is gaining ground, officials tell us, ahead of a meeting of euro-zone finance ministers on Friday in Copenhagen that is expected to seal a deal.

Under the favored option, the region’s bailout funds would rise temporarily to roughly €650 billion ($799 billion) by July. The arrangement would see the transitional European Financial Stability Facility continue running until June 2013 in parallel with the new, permanent bailout fund, the European Stability Mechanism.

The EFSF will maintain its €200 billion of commitments to the Greek, Irish and Portuguese bailouts, but its spare lending capacity of €240 billion is expected to be wiped out after mid-2013.

That suggests you probably should not take too much notice of reports of an agreement to boost the combined lending ceiling to €940 billion, a figure that represents the maximum combined size of both funds. In fact under the German plan, as we explain below, the funds available for borrowing at any one time are likely to be substantially smaller. Read More »

Earlier this month, the European Commission was charged by euro-zone governments with laying out the practical ways for expanding the bloc’s bailout funds beyond their current €500 billion limit. They would, we knew, involve some method of combining the current temporary European Financial Stability Facility with the permanent fund due to come into existence later this year, the European Stability Mechanism.

We got sight of the paper written by the commission staff and broke the story on Thursday describing the three ways in which the so-called firewall can be expanded. For those readers who have asked to see the paper, we’ve uploaded it here. Read More »

The impetus for a large increase of the euro zone’s bailout capacity appears to be weakening as tensions have eased in the region’s government bond markets, euro-zone officials say.

Governments in December said they would consider raising the bloc’s bailout capacity, as sovereign-bond yields were threatening to spiral out of control.

The European Commission, the EU’s executive arm, and governments of weaker economies such as Italy and Spain have since been pushing steps that would nearly double the bloc’s bailout capacity, officials said. But with yields on sovereign debt falling sharply in recent months, Germany, the Netherlands and Finland now argue there is less urgency to agree on a more ambitious increase of the lending capacity of the bloc’s two bailout funds, which is capped at €500 billion. Read More »

When you’re the troika –the European Commission, European Central Bank and International Monetary Fund- exerting public pressure on the wayward bailout-receiver is an obvious strategy.

The drawback is that the financial markets are watching closely and when the deadlines–that you were hoping would pile on pressure–are missed, the delay is priced in and cue stories about how the Greek stalemate is hitting trading.

Three weeks ago, we published a blogpost headlined “46 Days To Avoid Greek Default.” In it, we outlined the main steps that needed to be taken between the date of publication (January 16) and March 20, the date when Greece has to repay a €14.4 billion chunk of maturing debt. There are now 31 working days left on the clock and none of these steps has been completed. Another blogpost published today also outlines the immediate next moves on the Greek chess-board.

In fairness, we should point out that policy-makers, negotiators and others are working weekends too now, and Greece has a grace period of one week to make the payment, so the absolute deadline in March 27. Read More »

About Real Time Brussels

The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.